Specialist James Ahrens works at his post on the floor of the New York Stock Exchange Wednesday. Wall Street focused Wednesday on the bleak landscape ahead for the economy and sold off, wiping out the big gains from a day earlier and then some.

Richard Drew/AP

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Global stock markets fell sharply on Wednesday as investors fretted about twin uncertainties: the economy and whether policymakers can do much to help it.

Investment analysts point to multiple factors that may explain the downward trend of recent days, including simple fear and the influence of computer-driven "high frequency" trades by some investment firms.

But many say investors are focused especially on two big questions: First, how much has the outlook for economic growth deteriorated lately? And second, if a recession may be near, are central banks or governments able to give meaningful assistance to the economy?

On the first issue, many forecasters say the risk of another recession has risen, but that continued growth remains the likeliest scenario. Jobs and incomes have been rising in the US, for example, albeit slowly.

On the second issue, a widespread view among investment strategists is that governments may not have many tools left to aid the economy. Precious resources have already been spent fighting the last recession, and political obstacles in the US and Europe make it hard to achieve consensus on new measures.

In Europe, the challenge is how disparate nations can come together on a plan to hold their currency union together, even as Italy joins Greece and Spain on the list of problem debtors.

In America, the recent debt-ceiling negotiations made clear that bipartisan compromises will be hard to come by heading into the 2012 election, and that Republican lawmakers have no appetite for another round of deficit spending aimed at stimulating the economy

Perhaps most of all, though, the debt-limit brinkmanship left President Obama looking weaker – unable to push his goal of a "grand bargain" on fiscal policy to the finish line. Some critics say he also appears out of touch, pushing tax hikes on the rich, which they say undermines the important goal of job creation.

"Businesses, investors and ordinary Americans simply lack confidence in the ability of the Obama administration to get the country growing and create jobs," economist Peter Morici at the University of Maryland wrote in an analysis Wednesday.

That doesn't mean stocks deserve to keep falling. Some analysts say the sell-off is already overblown, and that the economic and political conditions are not that dire.

But a widespread view among business managers is that the Obama administration and Congress could be doing more to instill optimism.

An index of small-business confidence, tracked by the National Federation of Independent Business, has been falling for five straight months. One top business concern is that the president isn't focused enough on clearing away regulatory hurdles to job creation.

Concern about political leadership extends overseas, where stock markets have been falling in tandem with the US. Some nations, like Japan, may be unable to avoid a rise in their currency exchange rates, which could damage exports. And in Europe, concern is rising that Italy and Spain will "need a Greek-like bailout with funds that may be nearly impossible to come by," writes Sam Stovall, chief investment strategist at Standard & Poor's.

Even as fiscal policies are constrained by high debt levels that soared after the 2008 financial crisis, central banks also may be running near their policy limits. Some economists say that, with their short-term interest rates already near zero, the Federal Reserve and others have little ammunition left to fight a possible recession.

The Fed has tried QE1 and QE2 (two rounds of so-called quantitative easing of monetary policy). Now a QE3 policy is possible, perhaps involving new unconventional means of boosting growth.

On Tuesday, markets rallied as the Fed said it would keep its interest rate low for another two years – a signal of its determination to provide support to a fragile economy.

But the stock-market reversal Wednesday suggests that announcement, by itself, still leaves many investors in doubt about the path ahead for the economy and corporate earnings.